Inflation ticked higher in January as stubbornly high prices continued to strain Americans’ household finances as the Federal Reserve weighs a continued pause to its interest rate cut plans.
The Labor Department on Wednesday said that the consumer price index – a broad measure of how much everyday goods like gasoline, groceries and rent cost – increased 0.5% in January while it rose to 3% on an annual basis. The annual figure is the highest since June 2024.
Both the annual and headline CPI figures were hotter than the estimates of economists polled by LSEG, who had predicted inflation rose 0.3% on a monthly basis and 2.9% from a year ago, and came in higher than last month’s readings of 0.4% and 2.9%, respectively.
So-called core prices, which exclude more volatile measurements of gasoline and food to better assess price growth trends, were up 0.4% in January and 3.3% on an annual basis and were hotter than expected. LSEG economists had estimated a monthly rise of 0.3% and annual increase of 3.1%. Both figures were 0.1 percentage points higher than last month.
The report showed that inflationary pressures in the U.S. economy remain persistent despite progress in bringing inflation closer to the Federal Reserve’s 2% target over the past two years.
High inflation has created severe financial pressures for most U.S. households, which are forced to pay more for everyday necessities like food and rent. Price hikes are particularly difficult for lower-income Americans, because they tend to spend more of their already-stretched paycheck on necessities and have less flexibility to save money.
Energy costs rose 1.1% in January, a slower pace than the 2.4% reading in December. Gas prices were up 1.8% last month, while natural gas prices increased by the same amount.
Food prices increased 0.4% in January. The food at home index was up 0.5% for the month, with a 15.2% increase in the cost of eggs accounting for about two-thirds of the index’s total increase. Prices of fruits and vegetables helped offset some of those increase, falling 0.5% in the month, while cereals and bakery products also decreased by 0.4%.
The food away from home index was up 0.2% in January. Prices for limited service meals were up 0.3% for the month, while full service meals saw a smaller 0.1% increase.
Housing prices rose 0.4% in January and accounted for nearly 30% of the monthly CPI increase. Compared with a year ago, shelter prices are up 4.4%, which the Labor Department noted is the smallest 12-month increase since January 2022.
Transportation costs rose 1.8% in January and are up 8% from a year ago. Car insurance prices were a key contributor, having increased 2% in January and11.8% from a year ago. Airline fares increased 1.2% last month and are up 7.1% from a year ago.
This is a developing story. Please check back for updates.
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